I hope you ‘enjoyed’ the ride yesterday, from lows to highs, back to lows. Has this become again a market in which you should take your gains and go? Not really. We had a weak $IWM and a very poorly $XBI, but the $SPY and $QQQ were digesting. The two stars of the tape for us were $AAPL and $TSLA and they managed to create cash flow to absorb the misdirection action in the small caps and bio tech. This up and down type of move, with false breakouts in a lot of stocks is dangerous and can eat up your capital. Friday we also have the big call expiration for the month, so today I am the lightest I have been for a while. On a more positive note, $NVDA was a rock star in the earnings call and announced amazing results, which we posted on Twitter. It seems our call options for this stock will work well today if we don’t get another bump in the road. If $NVDA pulls the semis and tech up maybe it will not be only $AAPL that keeps the $QQQ elevated. Yesterday’s candle in the $QQQ is a bit unsettling and we need good news to keep this upward momentum going. There is a lot of news which is yet to hit the tape, like who will be the next FED chair, and all of this influences heavily the overall action. Maybe take some care today, get into strong names for cash flow but don’t wait for the music to end for you to be left without a chair.
I have been waiting since earnings for this giant to make a move and yesterday it did. When it passed $153.17 I doubled up and trimmed along the way until $155. I am now very light, awaiting today’s action. As I am writing the pre-market just opened with $QQQ very strong, so I am looking to see if there is continuation. Don’t chase things, as buying into strength did not work for a while now and it can eat up capital really fast.
$TSLA surprised everyone yesterday as it had continuation and it went all the way to $1019. I came with some stock overnight and I added when it went down towards Tuesday’s low, trimmed at around the 8 day EMA, and then trimmed all the way up to $1119. I got out of may call options as they were close to being maxed out. Towards the end of the day I bought another call option, more like a lotto, to see if it has any continuation today, and I avoided having stock overnight due to the indices being flimsy. This way I am still engaged into a move higher but with a small and defined risk.
I have to admit I have been shorting this stock when it got around $320 because it seemed inflated and I even kept a small put spread for Friday in case it will act poorly after earnings. However yesterday afternoon I put on a lotto call option for Friday $320, in case I am wrong, which I was, and I believe I will get paid handsomely if the investors continue the positive reaction to their amazing earnings call. I played it both ways because the value of my put spread was insignificant, but if it was to go down I would have been paid well, and I bought a small lotto call option (not spread) in which my profit is ‘unlimited’. The loss from the put spread pales in the face of the profit to be made from the call option of $320. Sometimes I do that when a stock is priced for perfection because despite amazing earnings it can go in a free fall. As I am writing $NVDA is at $313, the level before it made a new all time high. This may not happen today so don’t chase it unless it shows it has legs to stay at this level. Your stop should be at $306-308, but I would play this move with options rather than stock.
I would like to raise attention to this ‘awkward’ move type of market, when the banks don’t perform well, the tech sector is up-and-down and the $SPY is muted anything can happen. This very specific action in certain stocks is worrying that there is something moving behind the scenes and a ‘tree shake’ can take place at any time. Instead of having your ‘fruit’ lost better secure it and wait for a more clear situation. This Humpty Dumpty kind of market can chop up your capital and when it is put together you can be left with a bad quarter, instead of just a bad day. Keep you ears and eyes open because technical analysis works, but today’s action is also heavily influenced by macro news. The difference between us and robots is that we can ‘smell’ some moves dictated by political decisions, or rumors and we can get ahead of the game if we stay on top of the situation. Be tactical and careful as this is yet again an ‘adults swim’ only and it can be very rewarding but very easy to lose money at the same time. A wrong move can mean more than a paper cut and if you go against the trend you might find yourself at risk of ruining your week or quarter. Don’t chase things up or take a falling knife, use the levels to navigate this tape and keep reading our updates for guidance.
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P.S.: For any questions don’t hesitate to email me at [email protected]